UPDATE 1-VW resumes Iran exports, picks Mammut Khodro as partner

* Iran market may grow to about 3 mln cars per year -VW (Adds VW comment and background on Iran)

BERLIN, July 4 (Reuters) - Volkswagen will start exporting cars to Iran next month, returning to the resurgent Iranian market after more than 17 years in a move that may help the German carmaker reduce its reliance on volatile markets such as China and Brazil.

Volkswagen (VW) has signed an agreement with Iran’s Mammut Khodro which will import VW brand models Tiguan and Passat via eight dealerships, focusing on the greater Tehran area, VW said on Tuesday.

Europe’s largest automotive group is seeking to tap new overseas markets as it grapples with billions of euros in costs stemming from an emissions scandal while pushing a strategic shift to electric cars and new mobility services.

Group deliveries to China, VW’s biggest market accounting for over a third of its sales, fell 3.3 percent between January and May to 1.51 million cars. Sales in Brazil were down 1.9 percent to 116,600 cars.

VW is trying to catch up with French rivals PSA Peugeot Citroen and Renault which have been pushing hard into Iran since the country’s 2015 deal with world powers that saw international sanctions lifted in return for curbs on Tehran’s nuclear activities.

“We are strengthening once more our international presence.” Anders Sundt Jensen, VW’s project leader for Iran said in an emailed statement.

Wolfsburg-based VW, which sold its iconic Beetle in Iran in the 1950s and its Gol subcompact model in the 1990s, left the market in 2000.

Annual sales in the Iranian market are seen rising to about 3 million cars over the medium- to longer-term, VW said, citing government estimates.